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Journalist China
Business news from China By Doug Young.
Doug Young, journalist, has lived and worked in China for 20 years, much of that as a journalist, writing about publicly listed Chinese companies.
He is based in Shanghai where, in addition to his role as editor of Young’s China Business Blog, he teaches financial journalism at Fudan University, one of China’s top journalism programs.
He contributes regularly to a wide range of publications in both China and the west, including Forbes, CNN, Seeking Alpha and Reuters, as well as Asia-based publications including the South China Morning Post, Global Times, Shanghai Daily and Shanghai Observer
Photo of student helping teacher draws controversy
This week’s Street View takes us to the Baoshan District, where a series of pictures of a teacher and one of her students has created a bit of controversy online. Anyone looking for a scandal involving inappropriate teacher-student relations should stop reading now, as this particular incident has none of that and seems quite harmless in my view.
Instead, it involves photos of a primary school student holding up an umbrella for his teacher to protect her from the sun. The controversy arose because some people considered the act inappropriate, presumably because it implied the teacher was demanding this kind of subservient and possibly degrading behavior from one of her students. Read Full Post…
Bottom line: The revocation of global certification for Qihoo’s security software by 3 European bodies will undermine the company’s credibility and hamper its drive to go global, putting pressure on its stock for the next few months.
European bodies revoke Qihoo accreditation
Security software specialist Qihoo 360 (NYSE: QIHU) is finding itself in the middle of a global scandal, with word that several European accreditation bodies have refused to certify its core security software products due to the company’s misleading business practices. The case comes as an embarrassment to Qihoo, which is used to and largely ignores such scandals when they occur in its home market where such practices are relatively common.
But as Qihoo and its peers attempt to go global, they are quickly discovering that many of the things they do at home fall well below the standards set by global bodies, especially in the west. That won’t be too helpful for Chinese tech giants like Qihoo, Baidu (Nasdaq: BIDU), Xiaomi and Alibaba (NYSE: BABA), which are all trying to show the world and investors that they can compete outside their highly protected home market where standards are often a bit lower than in the west. Read Full Post…
Bottom line: Tsinghua Unigroup is likely to win the bidding for a controlling stake in HP’s China-based networking equipment unit, and could help HP consolidate its place as one of China’s leading IT service providers.
Bidding war breaks out for HP asset sale
Hewlett-Packard (NYSE: HPQ) is finding itself in a rare position of power in China, with word that an unusual bidding war has broken out as it looks for a partner to buy a controlling stake in its locally-based networking equipment unit. The development could bring not only a windfall in terms of money HP will get for its H3C Technologies unit, but will also allow it to choose between 2 potent partners to help consolidate its place as one of China’s leading IT services providers.
HP is in the process of splitting itself into 2 as part of a broader restructuring announced last fall. In this case the China-based H3C networking equipment venture would almost certainly go into its new HP Enterprise unit, focused on products and services for corporate customers. The other main unit under the break-up will include HP’s older PC and printer businesses, which will go by the name HP Inc. Read Full Post…
Bottom line: Yingli appears to be in financial distress but will avoid defaulting on debt obligations coming due next week, while China’s broader solar panel sector is likely to face new anti-dumping tariffs in Europe later this year.
Yingli assures investors on bond payment
The solar panel sector has become quite a turbulent place these days, riding high one day on reports of major new plant construction, only to stumble the next on signs of conflict and financial distress. This kind of conflicting news reflects the fact that the industry is still in the midst of a major overhaul that could ultimately see a few more companies get closed down or purchased, leaving a smaller field of the biggest, best-run players to survive over the longer term.
The latest signs of distress are coming from Yingli Green Energy (NYSE: YGE), one of China’s largest players, which has just announced it has the necessary funds to pay off a bond that will mature next week. Some may see such an announcement as a sign of strength; but the fact that Yingli is taking the unusual step of making an announcement seems aimed at allaying market concerns that it might not make the payment. The other big distress sign is coming from reports that indicate Europe could soon re-launch an anti-dumping probe into Chinese solar panels, following complaints that the Chinese are violating an earlier agreement designed to avoid punitive import tariffs. Read Full Post…
Bottom line: Baidu could be entering a period of profit erosion that will put pressure on its stock, while Tencent’s latest investment hints it could be preparing to roll out a global gaming platform by the end of this year.
Baidu profit drops
China’s Internet “Big 3” of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700) are often in the news on any given week, but we’re seeing a rare instance where all 3 are in the headlines on this final work day before the May 1 break. Baidu is leading off the BAT headlines with the release of its latest quarterly earnings that are led by a rare profit decline due to soaring expenses.
Rising costs may have also been a factor in the Alibaba news, which has the company freezing its global headcount for the rest of the year as it tries to rationalize itself after a period a breakneck growth. Last but not least is Tencent, whose relatively large purchase of a stake in a US gaming firm hints at the direction it will take in its overseas expansion. Read Full Post…
Bottom line: Baidu’s new go-slow global expansion strategy focused on emerging markets like Brazil and Egypt looks smart, but will provide limited contributions due to the small size of those markets.
Chinese online search leader Baidu (Nasdaq: BIDU) is making some major strategic adjustments in its global expansion, turning to developing markets and away from more lucrative but also extremely competitive western ones. That’s my main conclusion, following reports that Baidu has finally pulled the plug on its struggling Japan search service 8 years after choosing the market for its first foray abroad. At the same time, the company is making initial moves into Egypt with its first Arabic-language website, following earlier moves into Brazil and more recently into Thailand. Read Full Post…
Bottom line: China’s “Big 3” Internet tycoons are likely to see their fortunes continue to grow at rates far faster than the broader economy over the next year, and they could even overtake some wealthier real estate magnates.
Jack Ma named China’s richest Internet tycoon
Hong Kong’s Li Ka-shing may still lead the list of wealthiest men in China and Hong Kong, but his traditional formula for success is rapidly losing ground to China’s fast-rising Internet magnates. The heads of China’s “Big 3” Internet firms were all among the top 10 people on this year’s just-published Forbes list of the wealthiest men in China and Hong Kong, spotlighting the huge role that the Internet is playing in China’s economy. Whereas Li’s fortune took decades to build, the founders of Alibaba (NYSE: BABA), Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) made their fortunes much more quickly, mostly over the last decade. Read Full Post…
Bottom line: A booming China stock market and IPO reforms could fuel a new wave of re-listings by Chinese tech and media firms that were formerly traded in New York, led by an upcoming backdoor listing by Focus Media.
Xueda gets buyout offer
A pair of stories in the headlines today are highlighting a nascent movement that could see a growing number of US-listed Chinese firms take down their shingle in New York to return to stock markets closer to home. No companies have made such a move yet, but advertising specialist Focus Media could soon become the first with word that it’s moving closer to making a backdoor listing in China after leaving New York in 2013.
Meantime in a related piece of news Xueda Education (NYSE: XUE) said it has received a buy-out offer from Chinese financial firm Insight Investment (Shenzhen: 000526). Such a move would continue a trend that has seen a growing number of neglected US-listed Chinese firms abandon New York, where their shares have stagnated over the last few years. Read Full Post…
Bottom line: Apple’s new solar power initiative in China is a highly symbolic move to curry favor with local officials, and should win the company positive public relations points at very little cost.
Apple announces China solar farms
I have to commend Apple (Nasdaq: AAPL) for finally realizing it needs to improve its image in China, with word that the global tech giant is investing in 2 new solar farms to be built in interior Sichuan province. The move is actually quite masterful, as Apple is at once killing many birds with a single stone as it works to curry favor with Beijing.
The 2 new projects will contribute to China’s recent drive to produce more clean, renewable energy, which has been one of Beijing’s top priorities these last couple of years. The new farms are also being built in China’s interior, which has been a priority area for investment by Beijing leaders eager to reduce the wealth gap between interior regions and wealthier coastal areas. Last but not least, these new investments should be quite inexpensive for a company like Apple, and carry relatively small risks. Read Full Post…
Bottom line: A recent stabilization of China Mobile’s profits and revenue per user could be short-lived, and declines could resume and accelerate later this year as its rivals ramp up their 4G promotions.
China Mobile earnings report excites investors
Telecoms juggernaut China Mobile (HKEx: 941; NYSE: CHL) passed an important milestone in its latest quarterly results, posting its first increase in years for average subscriber revenue on strong gains for its new 4G service. But that milestone was partly offset by weakness in data services, its biggest future growth engine, hinting that the turning point for average revenue per user (ARPU) may be short-lived.
Of course we’ll have to wait for later quarterly results to see if China Mobile can continue to improve its revenue per subscriber, which will be critical to the company’s future as the Chinese mobile market rapidly approaches saturation. I wouldn’t be surprised if the figure start to erode again by the end of the year, due to stiff competition from rivals China Telecom (HKEx: 728; NYSE: CHA) and China Unicom (HKEx: 762; NYSE: CHU), which are just starting to aggressively promote their own new 4G services. Read Full Post…
Bottom line: Government officials are being forced to deal carefully with newly minted Internet giants like Alibaba, which sometimes commit transgressions due to their youth but also provide huge contributions to China’s economy.
Alibaba a double-edge sword for govt
A trio of stories about Alibaba (NYSE: BABA) nicely summarize both the risks and benefits that China’s Internet juggernauts present for the government, which must walk a fine line between taming these newly minted giants while being careful not to kill such economic powerhouses. In just the space of a decade, Alibaba, alongside Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU), have grown rapidly from venture-funded start-ups to become some of the world’s most valuable companies.
That growth and status has brought not only big prestige to China, but also valuable tax dollars to local governments and high-tech jobs that Beijing wants to replace lower-tech manufacturing labor. But at the same time, such young companies are particularly vulnerable to missteps, which can create chaos in the marketplace and Beijing needs to be careful to control. Read Full Post…
